Analyzing Mercer International (NASDAQ:MERC) & Wausau Paper Corp. (WPP)

Wausau Paper Corp. (NYSE: WPP) and Mercer International (NASDAQ:MERC) are both small-cap basic materials companies, but which is the better stock? We will contrast the two businesses based on the strength of their risk, analyst recommendations, profitabiliy, institutional ownership, earnings, valuation and dividends.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Wausau Paper Corp. and Mercer International, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Wausau Paper Corp.	0	0	0	0	N/A
Mercer International	0	3	1	0	2.25

Mercer International has a consensus target price of $16.00, suggesting a potential upside of 40.97%. Given Mercer International’s higher possible upside, analysts clearly believe Mercer International is more favorable than Wausau Paper Corp..

Dividends

Mercer International pays an annual dividend of $0.46 per share and has a dividend yield of 4.1%. Wausau Paper Corp. does not pay a dividend. Mercer International pays out 85.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Profitability

This table compares Wausau Paper Corp. and Mercer International’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Wausau Paper Corp.	1.79%	5.31%	1.52%
Mercer International	3.90%	11.69%	3.90%

Institutional & Insider Ownership

81.3% of Mercer International shares are owned by institutional investors. 4.9% of Mercer International shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Valuation and Earnings

This table compares Wausau Paper Corp. and Mercer International’s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	EBITDA	Earnings Per Share	Price/Earnings Ratio
Wausau Paper Corp.	N/A	N/A	N/A	N/A	N/A
Mercer International	$920.56 million	0.80	$200.62 million	$0.54	21.02

Mercer International has higher revenue and earnings than Wausau Paper Corp..

Summary

Mercer International beats Wausau Paper Corp. on 9 of the 11 factors compared between the two stocks.

Wausau Paper Corp. Company Profile

Wausau Paper Corp. (Wausau Paper) manufactures, converts and sells a line of towel and tissue products. The Company’s products are marketed along with soap and dispensing systems for the commercial and industrial away-from-home market. Under the Wausau Paper trademark, towel and tissue products, made primarily from recycled material, are marketed under a number of brands including Alliance, Artisan, DublSoft, DublNature, EcoSoft, OptiCore and Revolution. These products include washroom roll and folded towels; tissue products; a variety of towel, tissue, and soap dispensers; industrial wipers; dairy towels; household roll towels, and other towel and tissue products. The Company also offers controlled-use dispensing systems for the away-from-home market. The Company’s products are primarily sold within the United States and Canada.

Mercer International Company Profile

Mercer International Inc. is a producer of northern bleached softwood kraft (NBSK) pulp, which is pulp that is sold on the open market. The Company also produces and sells tall oil, a by-product of its production process, which is used as both a chemical additive and as a green energy source. It produces and sells NBSK pulp, which is a bleached kraft pulp manufactured using northern softwood. As of December 31, 2016, the Company operated two mills in Eastern Germany and one mill in Western Canada. As of December 31, 2016, its three NBSK pulp mills had consolidated annual production capacity of approximately 1.5 million air-dried metric tons (ADMTs) of NBSK pulp and were capable of generating 305 megawatts (MW) of electricity. Additionally, its German mills generate tall oil from black liquor, which is sold to third parties for use in various applications, including bio-fuels. The Company’s mills generate and sell energy to regional utilities.